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Copyright regulation of remixes: from purpose-based exceptions to one that is value-free

by Hein Scholtens

Popularity of remixes demands a new exception that focusses on market effects. This focus suits EU copyright law.

All remixes should be allowed. This is of course a very bald statement and in no way self-evident. In fact, I expect a large part of public to have no sympathy for any ‘free-riding on the riddim’ whatsoever. However, there are situations in which copyright law should not allow right holders to ban unlawful remixes.

Before explaining what these situations are, I will explain what remixes are, why some of them should be allowed and why current European and national rules are insufficient.

 I consider remixes to be defined as: all works that incorporate other works in whole or in part. Therefore, not only music which is the most common association, but also collages and some forms of user-generated content. Actually, ‘user-generated content’ is much used in literature as is traditional ‘adaptations’. Either way, what is more important is to emphasize technological neutrality, so that all remixes that fulfill certain conditions, are exempted.

 Notwithstanding my intention to keep it simple, it does take an electronic and also musical example, to help the relevance of remixes come across. This example is the song Krakaka by Dutch artist Teemong.

The facts of matter are both dramatic and humorous. On February 1, Amsterdam television channel AT5, reported a shooting in a local recording studio. This item featured interviews with two innocent bystanders. One explains that he heard “krakaka” – funnily imitating the sound of a machine-gun – when shots were fired (00:16), the other – still intoxicated(?) – gives his account of the event (01:36).

Teemong took these and other excerpts and mixed them with samples of George Michael’s smooth Careless Whisper. The result was a hip-hop beat that he posted on his YouTube-channel, only two days after the incident. Then six days later, he posted another version: a collaboration with rapper Mocromaniac. Together the videos soon reached over a million views, but also declined in popularity quickly.

There is no doubt that Teemong’s actions conflict with EU copyright law: the publication certainly infringes the reproduction, communication and making available rights (Articles 2 and 3 of the InfoSoc Directive) belonging to AT5 and George Michael.

This infringement cannot be justified by the quotation- or parody-exception (Article 5(3)(d) and (k) of the InfoSoc Directive). Even though lawyers have been trying to extend the scope of the exceptions, they are essentially purpose-based. And such a specific purpose, apart from having fun, is what most remixes defy.

Why then should we allow users to have fun at the expense of others? The answer lies in the question itself and raises another question: do remixes actually harm the original works?

We will put this question aside first since whatever the answer may be, to base on it a new exception would be very difficult. The problem is slow decision-making. Therefore, we now turn to an existing solution that requires us to look at actual creation of remixes, rather than publication on YouTube.

German free use (Article 24 of the Copyright Act) – not to be confused with fair use (Paragraph 107 of the Copyright Law of the United States) – could solve the remix-problem. Here is how it works: remixes that keep distance from the original works, do not need those authors’ permission for further exploitation, in this case on YouTube. Distance can be achieved by means of large creative differences, or a very different meaning (mostly parody).

Sadly, there are two, related, problems. In the first place, because the adaptation right (article 12 of the Berne Convention) is not harmonized – though that could be debated referring to Deckmyn and perhaps Softwarová – free use can only be associated with that right (also debatable) in order to comply with EU law. In the second place, ‘inner’ distance – that is the difference between the meaning of works – so far has been understood to refer to authors’ intention. On the one hand, this is a good thing because it allows more remixes than meet the ‘outer’ distance-criterion, on the other hand, however, they are less original and therefore more likely to conflict with the – unmistakably harmonized – reproduction right. Furthermore, emphasizing someone’s good intentions, again, only helps the likes of parodists.

Chakraborty tried to remove this restriction almost twenty years ago. He wanted to emphasize the effect remixes have on the market for the original works (fourth fair use factor), but was criticized heavily for this.

Current EU law provides two reasons why he should be supported. The first is that moral rights are not harmonized. This means that what is protected is the financial interest an author has in his work. If this interest remains unharmed, he should not be able to ban the remix in question. The second reason is that in ACI Adam, the Court of Justice also stressed the prevention of unfair competition.

Under these circumstances, the Krakaka-case should be approached from various angles. AT5 would not be able to exercise its exploitation rights, because markets for broadcasting and rap music do not overlap. George Michael could object, but not because of any personal objections but rather because it is feasible, in theory, that he may license Careless Whisper in the future. This song and Krakaka are both musical works. In practice however, it must be taken into account that permission would never be granted within two days, causing Krakaka to lose momentum. Finally, the license fee should be based on the amount of views.

This approach should be converted into an exception. Although conversion might take long, it would fit EU’s economic approach and answer to rapid development of all sorts of remixes.

In conclusion, remixes are complex works that can become popular very quickly. Due to their complexity, gaining permission in advance is almost impossible. Possible infringement can barely be prevented because of the purpose-specific approach exceptions take. Therefore a new exception is necessary, which takes into account a negative impact and compensates this.

Will the CJEU be willing to define willingness?  

by Kirsty Mcdougall

There is much anticipation for the CJEU preliminary ruling in the Huawei Technologies case on the legal test to be applied to decide whether seeking injunctions on the basis of Standard Essential Patents (SEPs) where a fair, reasonable and non discriminatory (FRAND) commitment exists may be deemed abusive under Art. 102 TFEU. The reference was made by the District Court of Dusseldorf which requested clarification on the standard to follow for the finding of an abuse. This post will focus on the second question asked of the CJEU:

“Does Article 102 TFEU lay down particular qualitative and/or time requirements in relation to the willingness to negotiate? In particular, can willingness to negotiate be presumed where the patent infringer has merely stated (orally) in a general way that it is prepared to enter into negotiations, or must the infringer already have entered into negotiations by, for example, submitting specific conditions upon which it is prepared to conclude a licensing agreement?”

At what point do SEP holders who seek injunctions face antitrust liability under Art 102 TFEU is an issue that has gained prominence in both the telecommunications industry and the EU Courts. SEP holders are granted patents on the basis of agreements with SSOs to license to other parties under FRAND terms and conditions. There is a lack of judicial clarity as to what conditions the parties involved can be deemed to be committed to FRAND. Much of the discussion in this area has involved the willingness of the licensee to FRAND terms and conditions.

There is debate as to the consequences of the seeking of injunctions by SEP holders. On the one hand some have argued that the seeking of injunctions is unreasonable due to many SEP holders committing to FRAND terms and conditions with SSOs. The Institute Electrical and Electronics Engineers (IEEE) amended its bylaws in 2015 to prohibit the seeking of injunctions. Given the prominence of the IEEE SSO this has been seen as a threat to SEP holders’ rights. There is a strong argument made by academics and industry experts that the prohibition of an SEP holders’ right to seek an injunction invites opportunism by implementers.

SEP holders are more often than not dominant undertakings in their given industry. There must be protection for licensees under the circumstances where the SEP holders abuses their position. By making licensing a difficult and lengthy process with non-preferential conditions the SEP holder can make it exceptionally difficult for essential implementation of the standard. Without the prospect of facing antitrust liability for the seeking of such injunctions there are few constraints on the conduct of SEP holders.

The key to judicial clarification on this issue is to adopt a similar approach as is applied to other areas of conflict between intellectual property and competition law, namely a balancing of incentives. Defining the conditions and limitations as to when parties are considered to be willing to commit to FRAND terms and conditions is essential to clarifying antitrust liability and allowing SEP holders and implementers to license under FRAND with a greater degree of certainty.

The discussions as to what constitutes willingness has been considered in a number of cases. Beginning with Orange Book Standard, the Commitment and Prohibition Decisions of the European Commission in Samsung and Motorola retrospectively alongside the progression of the Huawei technologies case.

Orange Book Standard Case involved a patent essential to standards for covering recordable compact discs as laid out in a document entitled Orange Book. Philips the patent owner sought an injunction against compatible disc manufacturers who did not seek a license from them. One manufacturer argued in defence that Philips was abusing its dominant position under Art.102 TFEU. The German FSC set forth the conditions under which the SEP holder faces antitrust liability. The defendant must unconditionally enter into a licence agreement with a royalties rate decided by the SEP holder and reviewed by the court and they must behave as an actual licensee and pay royalties into an escrow account. This gives quite a restrictive framework surrounding the requirements to show willingness.

In comparison to the German FSC the European Commission left open the circumstances under which an implementer can be deemed a ‘willing licensee’ in its commitment and prohibition Decisions in Samsung and Motorola under Arts. 9 and 7 Regulation 1/2003. Samsung and Motorola had committed to license their SEPs under FRAND terms and conditions with the European Telecommunications Standard Institute (ETSI). The Commission in both these cases viewed the licensee’s alleged unwillingness as an integral part of the assessment in finding whether there was an abuse under Art.102 TEFU. Given that the Samsung case is a Commitment Decision there is a lack of information as to how the Commission deemed the licensee to be willing. However the discussion in the case showed that in the Commission’s reasoning they were concerned with the behaviour of the licensee at the time that the injunction was sought. This leaves open the question as to the impact of the licensee’s conduct during prior negotiations and whether prior potential unwillingness is taken into consideration in determining willingness. In the Motorola Decision the licensee gave an orange book offer that allowed judicial rate setting with retroactive effect, this was deemed to demonstrate willingness.

Both the Samsung and Motorola Decisions have been met with significant praise. The Commission’s reasoning strikes a balance between holding SEP holders accountable to their FRAND commitments not allowing them to gain undue leverage in licensing negotiations whilst also ensuring they obtain remuneration for their SEPs and are not forced to suffer unwilling licensees.

Advocate General Wathelet delivered his Opinion on willingness in Huawei Technologies. He states that the test should be to determine that the licensee is ‘objectively ready, willing and able to enter into such a licensing agreement.’ This definition appears to be broader and more favourable to the licensee than previous case law. Furthermore the Opinion requires the SEP holder not only to notify the licensee of the alleged infringement but to make them a FRAND offer. Only where the licensee does not respond to that offer in a ‘diligent and serious manner’ can the SEP holder proceed in seeking an injunction free of any antitrust liability.

In order to clarify when a licensee is willing to license under FRAND terms and conditions the CJEU must clarify the surrounding criterion. First this should be approached by taking into consideration industry standards and practices in SEP licensing agreements. By fully understanding SEP licensing agreements in the context of a particular industry, namely telecommunications industry characteristics as this is where SEP licensing agreement issues most often arise, the CJEU will be able to set forth a framework that allows for willingness to be established upon what is deemed reasonable negotiating practices. The CJEU must maintain a balance in their ruling so not to encroach on the negotiating abilities of either party unjustly. The CJEU should follow the Opinion of Advocate General Wathelet using an objective test to establish willingness and ableness. They should set forth a time framework that allows more clearly SEP holders to know when they are within their rights to seek injunctive relief without potentially facing antitrust liability. Therefore they should clarify the issues raised in Samsung as to at what point during the negotiations should the licensee be deemed unwilling.

In my opinion the requirement of the SEP holder to make a FRAND offer to the licensee before  being able to seek injunctive relief is an overreach although it does provide the SEP holder with clarity as to when they can be exonerated from antitrust liability. A solution would be for the CJEU to allow the SEP holder to seek injunctive relief where negotiations have reached a point where it can be said there is a reasonable licensing agreement offer that would reasonably be deemed to comply with FRAND. However if a licensing agreement is then not concluded in a diligent time frame in keeping with normal industry practices the SEP holder can reasonably seek injunctive relief without potentially abusing its dominant position.